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Problem customising space in a list

I've having a right headache trying to reduce the space between text and dividing line on my blog here: http://uk451.blogspot.com/

If you look at the widget titled TOP 3 POSTS in my right sidebar, you'll see the titles of three posts, but you will notice that the spacing between the text and the faint grey divider line is much bigger than it is in the list of CATEGORIES and ADMIN headers.

I can change the spacing of the text using either .popular-posts ul li or #PopularPosts1 ul li and a negative bottom margin, but this doesn't move the divider line and the text ends up laying over the top of those divider lines.

I'm simply trying to get the spacing on the TOP 3 POSTS list as tight as it is on both the CATEGORIES and ADMIN lists.

Oh, God, I know I must sound like such an effing buffoon, and I suspect us bloggers are the bain of the coder's life, BUT what you see in the souce code when you use firebug and other such tools, isn't what I have in the template I have access to. I'd post the whole template here, but I'm not sure it'd fit in one post.

I know .PopularPosts .widget-content ul li{padding:.7em 0} shows up when you view the souce through firebug, etc, but it's not in my template code.

I'll try putting that in manually and remove the padding - see what happens.